Question 1

If one country can produce a good with fewer resources than another country, this is called:

Accepted Answer

A)  specialization. 
B)  geographic advantage. 
C)  comparative advantage. 
D)  absolute advantage. 
E)  free trade. 
A)  specialization. 
B)  geographic advantage. 
C)  comparative advantage. 
D)  absolute advantage. 
E)  free trade. D

Question 2

The North American Free Trade Agreement affects trade between:

Accepted Answer

A)  the United States, Cuba, and Brazil. 
B)  the United States, Canada, and Mexico. 
C)  the United States, Puerto Rico, and Cuba. 
D)  Brazil, Bolivia, Peru, and Columbia. 
E)  China and the United States. 
A)  the United States, Cuba, and Brazil. 
B)  the United States, Canada, and Mexico. 
C)  the United States, Puerto Rico, and Cuba. 
D)  Brazil, Bolivia, Peru, and Columbia. 
E)  China and the United States. B

Question 3

Comparative advantage is the ability of a country to produce a good at a ________ opportunity cost relative to other countries.

Accepted Answer

A)  higher 
B)  lower 
C)  equivalent 
D)  none of the above 
A)  higher 
B)  lower 
C)  equivalent 
D)  none of the above B

Question 4

Exhibit 15-1 Production possibilities curves  
-In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of corn is equal to:

Accepted Answer

A)  4 units of wheat. 
B)  4 units of corn. 
C)  1/4 unit of wheat. 
D)  15 units of wheat. 
E)  60 units of wheat. 
A)  4 units of wheat. 
B)  4 units of corn. 
C)  1/4 unit of wheat. 
D)  15 units of wheat. 
E)  60 units of wheat.

Question 5

A tax levied on imported goods is called a(n):

Accepted Answer

A)  excise tax. 
B)  quota. 
C)  foreign profits tax. 
D)  tariff. 
A)  excise tax. 
B)  quota. 
C)  foreign profits tax. 
D)  tariff.

Question 6

Trade between nations A and B:

Accepted Answer

A)  leaves the production possibilities of nation A unchanged. 
B)  leaves the production possibilities of nation B unchanged. 
C)  increases the consumption possibilities of both nations. 
D)  All of these are true. 
A)  leaves the production possibilities of nation A unchanged. 
B)  leaves the production possibilities of nation B unchanged. 
C)  increases the consumption possibilities of both nations. 
D)  All of these are true.

Question 7

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

Accepted Answer

A)  Greater popularity of U.S. exports in Japan. 
B)  A higher price level in Japan. 
C)  Higher real interest rates in the United States. 
D)  Higher incomes in the United States. 
A)  Greater popularity of U.S. exports in Japan. 
B)  A higher price level in Japan. 
C)  Higher real interest rates in the United States. 
D)  Higher incomes in the United States.

Question 8

The theory of comparative advantage suggests that nations should produce a good if they:

Accepted Answer

A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation. 
A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation.

Question 9

Exhibit 15-4 Coffee and tea output (pounds per hour) $$\begin{array} { | l | c | c | } 
\hline \text { Country } & \text { Coffee } & \text { T ea } \
\hline \text { Brazil } & 10 & 5 \
\text { China } & 8 & 8 \
\hline
\end{array}$$
-As shown in Exhibit 15-4, if each country produced according to its comparative advantage, Brazil would produce:

Accepted Answer

A)  tea and China would produce coffee. 
B)  coffee and China would produce tea. 
C)  both coffee and tea. 
D)  neither coffee nor tea. 
A)  tea and China would produce coffee. 
B)  coffee and China would produce tea. 
C)  both coffee and tea. 
D)  neither coffee nor tea.

Question 10

If India has an absolute advantage in rug production when compared to England, then:

Accepted Answer

A)  India should export rugs to England. 
B)  England should export rugs to India. 
C)  international trade should not occur. 
D)  England uses fewer resources to produce rugs than India. 
E)  India uses fewer resources to produce rugs than England. 
A)  India should export rugs to England. 
B)  England should export rugs to India. 
C)  international trade should not occur. 
D)  England uses fewer resources to produce rugs than India. 
E)  India uses fewer resources to produce rugs than England.

Question 11

Which of the following is not included in the current account?

Accepted Answer

A)  Exports of goods. 
B)  Imports of goods. 
C)  U.S. capital inflow and outflow. 
D)  Unilateral transfers. 
A)  Exports of goods. 
B)  Imports of goods. 
C)  U.S. capital inflow and outflow. 
D)  Unilateral transfers.

Question 12

A tax on an imported good is called:

Accepted Answer

A)  an export. 
B)  dumping. 
C)  a quota. 
D)  a tariff. 
E)  free trade. 
A)  an export. 
B)  dumping. 
C)  a quota. 
D)  a tariff. 
E)  free trade.

Question 13

If the United States were to adopt a policy of free trade with European countries and Japan, this policy would:

Accepted Answer

A)  help the United States and hurt the other countries because the United States has a larger population. 
B)  help all of the countries involved because every country would have a comparative advantage in the production of some goods. 
C)  hurt all of the countries involved because all the countries are capable of producing anything that could be produced in one of the other countries. 
D)  help the United States and hurt the other countries because the United States has more natural resources than the other countries. 
A)  help the United States and hurt the other countries because the United States has a larger population. 
B)  help all of the countries involved because every country would have a comparative advantage in the production of some goods. 
C)  hurt all of the countries involved because all the countries are capable of producing anything that could be produced in one of the other countries. 
D)  help the United States and hurt the other countries because the United States has more natural resources than the other countries.

Question 14

Following the principle of comparative advantage, specialization:

Accepted Answer

A)  permits greater levels of total production than would be attained without it. 
B)  increases the dependency of countries on trade. 
C)  both of the above. 
D)  neither of the above. 
A)  permits greater levels of total production than would be attained without it. 
B)  increases the dependency of countries on trade. 
C)  both of the above. 
D)  neither of the above.

Question 15

One reason why we might want to impose restrictions on free trade is to protect infant domestic industry in the formative stages of development and thus unable to compete yet on world markets.

Accepted Answer

A) True 
 B)False

Question 16

The balance of trade is the value of a nation's ____________.

Accepted Answer

A)  goods and service exports times goods and service imports 
B)  goods exports subtracted from goods imports 
C)  goods imports subtracted from goods exports 
D)  net goods imports plus net capital inflows 
A)  goods and service exports times goods and service imports 
B)  goods exports subtracted from goods imports 
C)  goods imports subtracted from goods exports 
D)  net goods imports plus net capital inflows

Question 17

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

Accepted Answer

A)  fixed. 
B)  arbitrage. 
C)  floating. 
D)  unilateral. 
E)  balance of payments. 
A)  fixed. 
B)  arbitrage. 
C)  floating. 
D)  unilateral. 
E)  balance of payments.

Question 18

The Japanese demand curve for dollars is downward-sloping because a:

Accepted Answer

A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S. 
A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S.

Question 19

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange rate is:

Accepted Answer

A)  1,000 yen per dollar. 
B)  1,000 dollars per yen. 
C)  0.001 dollars per yen. 
D)  none of these. 
A)  1,000 yen per dollar. 
B)  1,000 dollars per yen. 
C)  0.001 dollars per yen. 
D)  none of these.

Question 20

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles, we would expect domestic:

Accepted Answer

A)  textile prices to decline. 
B)  textile production to increase. 
C)  textile employment to increase. 
D)  textile prices to rise. 
A)  textile prices to decline. 
B)  textile production to increase. 
C)  textile employment to increase. 
D)  textile prices to rise.

If one country can produce a good with fewer resources than another country, this is called:

The North American Free Trade Agreement affects trade between:

Comparative advantage is the ability of a country to produce a good at a ________ opportunity cost relative to other countries.

Exhibit 15-1 Production possibilities curves -In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of corn is equal to:

A tax levied on imported goods is called a(n):

Trade between nations A and B:

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

The theory of comparative advantage suggests that nations should produce a good if they:

Exhibit 15-4 Coffee and tea output (pounds per hour) Country Coffee T ea Brazil 10 5 China 8 8 -As shown in Exhibit 15-4, if each country produced according to its comparative advantage, Brazil would produce:

If India has an absolute advantage in rug production when compared to England, then:

Which of the following is not included in the current account?

A tax on an imported good is called:

If the United States were to adopt a policy of free trade with European countries and Japan, this policy would:

Following the principle of comparative advantage, specialization:

One reason why we might want to impose restrictions on free trade is to protect infant domestic industry in the formative stages of development and thus unable to compete yet on world markets.

The balance of trade is the value of a nation's ____________.

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

The Japanese demand curve for dollars is downward-sloping because a:

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange rate is:

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles, we would expect domestic:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

Economies in Transition

Growth and the

Filters

Exam 15: International Trade and Finance

If one country can produce a good with fewer resources than another country, this is called:

The North American Free Trade Agreement affects trade between:

Comparative advantage is the ability of a country to produce a good at a ________ opportunity cost relative to other countries.

Exhibit 15-1 Production possibilities curves -In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of corn is equal to:

A tax levied on imported goods is called a(n):

Trade between nations A and B:

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

The theory of comparative advantage suggests that nations should produce a good if they:

Exhibit 15-4 Coffee and tea output (pounds per hour) Country Coffee T ea Brazil 10 5 China 8 8 -As shown in Exhibit 15-4, if each country produced according to its comparative advantage, Brazil would produce:

If India has an absolute advantage in rug production when compared to England, then:

Which of the following is not included in the current account?

A tax on an imported good is called:

If the United States were to adopt a policy of free trade with European countries and Japan, this policy would:

Following the principle of comparative advantage, specialization:

One reason why we might want to impose restrictions on free trade is to protect infant domestic industry in the formative stages of development and thus unable to compete yet on world markets.

The balance of trade is the value of a nation's ____________.

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

The Japanese demand curve for dollars is downward-sloping because a:

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange rate is:

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles, we would expect domestic:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

Economies in Transition

Growth and the

Filters